LOS ELES LIBRARY BANKERS' ADVANCES AGAINST PRODUCE FROM THE SAME PUBLISHERS BANKERS' ADVANCES. By F. R. Stead. Associate of the Institute of Bankers. Edited by Sir John Paget, K.C. In this new book Advances against Marketable Securities, Goods and Produce, Real Property, Ships, Debts, Debentures, etc., are explained in a compre- hensive manner, and the considerations, necessary in Granting Advances to Local Authorities, Building Societies, Partnerships, Joint Borrowers, Trustees, Personal Repre- sentatives, etc., receive adequate treatment. In demy 8vo, cloth gilt, 144 pp., 6s. net. BANKERS' SECURITIES AGAINST ADVANCES. By Lawrence A. Fogg, Certificated Associate of the Institute of Bankers. This book, which explains the theory and practice relating to the various classes of securities handled by bankers, will prove specially valuable to Bank Managers and Chief Clerks, and it is also intended for the use of candidates for the examinations of the Institute of Bankers, and other students of banking theory. In demy 8vo, cloth gilt, 123 pp., 6s. net. TITLE DEEDS, AND THE RUDIMENTS OF REAL PROPERTY LAW. By F. R. Stead. In this book the author has brought together the results of a special study and of an excep- tional amount of actual experience in the examination of title deeds. It will be found particularly interesting to bankers and others to whom a knowledge of the subject is useful. Third Edition. In demy 8vo, cloth, 151 pp., 6s. net. BANKERS' ADVANCES AGAINST PRODUCE BY ALFRED WILLIAMS FELLOW OF THE INSTITUTE OF BANKERS; OF THE BANK OF LIVERPOOL AND MARTINS, LTD., LIVERPOOL j * 9 OJI I 1)1 ■ LONDON SIR ISAAC PITMAN & SONS, LTD. PARKER STREET, KINGSWAY, W.C.2 BATH, MELBOURNE, TOBONTO, NEW YORK 1922 o Printed by Sir Isaac Pitman & Sons, Ltd. Bath, England ... ,*••■•• • . i i t w • V \A G<] v 6 FOREWORD I wish to acknowledge my indebtedness to my colleagues in the Liverpool Banks, who by their valuable suggestions and advice have greatly assisted me in the preparation of this book. I am also indebted to the publications enumerated below, free use of which I have made. ALFRED WILLIAMS. The Journal of the Institute of Bankers, Numerous Articles Therein. Bankers' Advances on Mercantile Securities, A. R. Butterworth Sale of Goods Act, 1893, and the Factors' Acts, 1889-1890, Sir W. D. Chalmers, K.C.B., C.S.I. The Factors' Act, 1889, C. H. L. Neish and A. T. Carter The Factors' Acts, H. Cassie Holden, B.A., LL.B. The Law Relating to Factors, P. T. Blackwell Elements of Mercantile Law, T. M. Stevens, D.C.L. Law of Partnership, A. Underhill, A.M., LL.D. Carriage of Goods by Sea, T. G. Carver, M.A. Law Dictionary, G. Sweet The Law of Banking, Sir John R. Paget, Bart., K.C. Grant's Law of Banking. A. M. Langdon, K.C, Herbert Jacobs, and A. C. Forster Boulton The Law of Banking, Heber Hart, LL.D. The Accountant's Compendium, Sidney S. Dawson, M.C., F.C.A. CONTENTS CHAP. FOREWORD I. A BRIEF ACCOUNT OF HOW THE ADVANCES ARE ARRANGED AND OF THE DOCUMENTS IN USE ii. factors' act, 1889 III. THE DOCUMENTS CONSIDERED IV. THE PLEDGE — THE FORMS IN USE TRUST LETTER, ETC. . APPENDIX 1 : CASES APPENDIX 2 : FORMS INDEX -THE PAGE V 1 23 46 78 103 111 149 Vll BANKERS' ADVANCES AGAINST PRODUCE CHAPTER I A BRIEF ACCOUNT OF HOW THE ADVANCES ARE ARRANGED AND OF THE DOCUMENTS IN USE Two divergent views have been held by bankers and by writers on Banking Law with regard to the desirability and safety of advances against produce. Mr. John Hutchison may be taken as the exponent of one of these views, and Sir John R. Paget as the exponent of the other. Mr. John Hutchison in his Practice of Banking makes the following remarks — " It will be observed from the forms of the documents known as Brokers' Undertakings or Brokers' Engagements in connection with produce (see Miscellaneous Forms, Vol. IV), that these are utterly worthless as securities. The shareholders of banks suspected of making advances on such documents should demand explicit information on the point, and if found to be made, steps should be taken by them to prevent a repetition of the practice. Large sums, we believe, are frequently lost to shareholders in connection with advances of this description made in Liverpool, and in one or two other seaports, where, as has been observed, ' commercial thimblerigging runs riot.' If assistance l 2 bankers' advances against produce by traders is required in this way, the formation of a ' Traders ' Loan Company might be projected, with its object openly professed, or a ' Traders ' Pawnbroking Company, to meet the case of loans made exclusively on warrants, Delivery Orders and Warehousekeepers' Certificates. There might, however, be instituted with effect a ' General Hypothecation Company ' by whom guaranteed transferable warrants for convenient amounts might be issued and occasionally accepted by the banks against advances." It will be noticed how very different in tone and in view is the following extract, which is taken from Sir John Paget 's Law of Banking — " Provided the banker is dealing with honest and responsible persons, documents of title to goods, such as Bills of Lading, Dock Warrants, Ware- housemen's Certificates, Delivery Orders, and the like, are convenient securities for advances. By means of them goods can be effectively pledged, which obviously could not otherwise be so utilized by reason of their bulk. By means of Bills of Lad- ing, in especial, goods on the high seas can be hypothecated before arrival, and thus used as security for bills given for the price. The Factors Act, 1889, the Sale of Goods Act, 1893, constitute a praiseworthy effort to protect bankers and others who take such documents as security. They do not profess to elevate them to the position of the banker's ideal security, the fully negotiable instru- ment to which he acquires an indefeasible title, whatever the customer's position, whether the customer is honest or not, whether the security is his own or he has authority to deal with it, or not, HOW ADVANCES ARE ARRANGED 6 and whether the banker takes it for an existing debt or a fresh advance. And, unfortunately, the provisions of the two Acts are so tangled, so overlapping and complicated by cross-reference and the idea of reducing everything to the common denominator of the ' Mercantile Agent ' that, for want of certainty, the safeguards are not so reassuring as they were doubtless intended to be. Yet it is to these Acts that the banker has to look when confronted with questions of title or authority in relation to documents of this sort pledged as security for advances. For, with the possible exception of Bills of Lading, no document of title to goods is a negotiable instrument in the strict sense of the word. The documents are merely symbols of the goods, and the idea of indirectly making goods negotiable has no place in law." These being the two divergent views, readers will expect me, at the outset, to say to which school I belong. Do I take the somewhat contemptuous view of produce advances which Mr. Hutchison holds, or do I side with Sir John Paget ? I may frankly say that no banker, who has ever been engaged in produce advancing in Liverpool, could hesitate for a moment. Produce advances are made in that city, and in many other cities in this country, on lines not altogether free perhaps from legal difficulty or com- plication, but on lines which, in practice, are found to work in the interests both of the bank and of its customer. I am free to admit that advancing against produce is probably the most difficult part of a British banker's work, and that it is only by gradual experience that a banker can learn to avoid pitfalls which attend this particular class of business. Given, however, the experience, there is no reason 4 BANKERS ADVANCES AGAINST PRODUCE why a banker of ordinary intelligence should not safely and profitably conduct the business of advancing against produce. In making such advances it is true that much money has been lost, but infinitely more has been made by bankers, and it is well worth while to try to master the underlying principles and leading legal and commercial considerations which govern the practice of produce advances. In the present chapter I propose to describe in non-legal phraseology the financing of produce from the time it is shipped to this country up to its sale to the British consumer. In subsequent chapters the documents of title, the forms of lien and pledge, the questions of storage, insurance, and marketability of the different kinds of produce will be dealt with. When we speak of produce in connection with our subject, we mean produce imported from abroad, such as cotton, wheat and other grains, rubber, tobacco, provisions of all sorts, timber, metals, and raw products generally, but, for purpose of illustrating the subject, Raw Cotton will be considered. The important cotton markets in this country are in Liverpool and Manchester. In both places, but particularly in Liverpool, there are established a large number of firms dealing in the import of raw cotton from the United States, Egypt, India, Peru, Brazil, and other countries. Most of the firms are of such standing, both in character and in financial position, as to justify a banker in accepting them as borrowing customers. The usual procedure is for the cotton importer or merchant to see his banker some time before September or October, which is the beginning of the cotton season, and arrange with him the accommodation the banker is prepared to grant during the coming season. Bearing in mind that HOW ADVANCES ARE ARRANGED 5 the cotton season, so far as importing is concerned, is a short one, shipments have to be crowded into a very few months, the height of the season being reached in November and December, and it is at that time, accordingly, that the maximum accommodation is required. The merchant may say " I want to run up to £200,000 in all." If he possesses sufficient capital the arrangement usually made with his banker is that he may have, say, £20,000 of accommodation without security. The remaining £180,000 must be secured by cotton in the form of Bills of Lading or Warehouse Receipts in the bank's name, showing a margin in value of 10 per cent, i.e., £198,000 worth of cotton would be required to cover the £180,000 of accommodation. Now it is quite obvious that when the merchant sells his cotton, he has to repay the bank, and this may be done in two ways : Firstly, the merchant may pay the bank cash against cotton released to him, or, secondly, the bank may entrust the merchant with the cotton in order that he may sell it and pay the proceeds, when he receives them, to the bank under his Trust Engagement. This latter method is the one generally adopted. Accordingly, the banker arranges with the merchant at the opening of the season the extent to which Trust Engagements will be taken by the bank. In the above case, the accommodation may take the following lines — Total accommodation running at one time — £200,000— of which £20,000 may be unsecured, £20,000 against Trust Engagements for cotton, and £160,000 secured by cotton, with the usual margin. These figures are taken by way of illustration. 6 BANKERS ADVANCES AGAINST PRODUCE The limits of accommodation usually run between £50,000 and £200,000, but at the height of the season, in the case of rich and powerful firms, the limits run to higher figures still. The merchant, having arranged his banking accom- modation, instructs his House or his agents in America or Egypt, or elsewhere, as the case may be, to buy the cotton, which is usually done either direct from the cultivator, or from local dealers ; at any rate the cotton is got together, pressed into bales, and either taken to the ship's side as it is at Alexandria, Savannah, New Orleans, and some other ports, or delivered to a railroad in the interior for conveyance to the sea-port, and shipment thence to Europe. In the first case, viz., shipment on board a steamer without intervention of a railroad, the ship's Bill of Lading is obtained in exchange for the cotton, and in the case of all cotton — except American cotton — a ship's Bill of Lading is thus obtained. In the case of American cotton, however, the great majority of shipments are made by means of the railroads from some interior point, and a " Railroad " or " Through ' Bill of Lading is obtained in exchange for delivery of the cotton to the railroad. The Bill of Lading — whether ship's Bill of Lading or Through Bill of Lading — is then attached by the shipper to the draft drawn by the shipper either upon the importer in Europe, or, as is more frequently done, upon the importer's banker. In the case of American drafts, they are drawn at sixty or ninety days' sight ; in the case of Egyptian, at three months' date ; and in the case of other countries, at various tenors ; but seldom less than three months. The draft, with Bill of Lading attached, is sold to Exchange buyers — generally banks — who HOW ADVANCES ARE ARRANGED 7 transmit the Bill and Bill of Lading to their European banking agents. The great mass of bills drawn on English importers and their bankers are sent to Liverpool or Manchester, as the case may be, presented for acceptance, and after acceptance forwarded to London banks, who are the agents of the Exchange buyers. In the case of drafts on banks, the Bills of Lading are detached by the bank against the bank's acceptance of the bill. In the case of drafts on the importers themselves, the accepted drafts with relative Bills of Lading attached, usually lie with the Exchange buyers' Liverpool or Manchester agents, pending arrival of the cotton, when the acceptors come forward and take up the drafts and documents under rebate. Marine Insurance is attended to either by the shipper, or by the importer, as may be arranged. If the shipper attends to it, which is usually the case, a certificate of Marine Insurance accompanies the Draft and Bill of Lading. If the importer attends to it, he usually covers under Floating Policies on this side. In the case of the Shipper's Draft being drawn on the bank, the bank accepts the draft under the definite instructions of its customer furnished at the time the draft is presented (the customer usually inspecting the shipping documents first) and retains the shipping documents as security for the bank's liability as acceptor. The letter of instructions should be worded so as to protect the bank against defective documents. (See Appendix forms N and O.) In the case of the draft being drawn on the importer, he, when he wishes to take it up, usually goes to his bank and requests them to retire his draft and get the shipping documents. These documents are then held as security for the advance which is thus given. The bank, 8 bankers' advances against produce accordingly, in either case, usually comes to hold the shipping documents for the cotton. The customer watches for the arrival of the cotton, and the bank does the same, so far as it can, by scrutinizing the list of steamship arrivals and also seeing that the shipping documents do not remain in their hands unduly, but it certainly has to rely in the great majority of cases on the customer searching the ship's manifests and tracing the arrival of the cotton. When the cotton arrives either the Bill of Lading is sent by the bank to a warehousekeeper, with instructions to claim the cotton and store it in the name of the bank — Fire Insurance being attended to by the customer — or it is sent in a Trust Letter (see Appendix for forms of Trust Letters) to the customer himself with similar instructions, or with instructions merely to realize the cotton and pay the proceeds to the bank. It is at this stage that reliance on the Trust Letter begins. In the event of the cotton being stored in the bank's name, Delivery Orders or Transfer Orders may be issued by the bank to the customer and made subject to the original Trust Letter in which the Bill of Lading was sent to him. Warehouse receipts for any cotton that is stored in the bank's name ought to come into the bank within a reasonable time (the period varies according to the quantity of cotton and the congestion, or otherwise, of the quays) ; if not received within about fourteen days after the Bill of Lading has been handed to the customer or the warehousekeeper, the bank should enquire as to the position of matters. After storage the cotton lies in the warehouse until the customer wishes to deliver it, or part of it, against sales, such sales being advised by the customer, who gives the names of the buyers, thus placing the bank in a position HOW ADVANCES ARE ARRANGED 9 to satisfy itself as to the responsibility of the buyers, and to follow the proceeds in case of need. Upon the customer applying to the bank for a Delivery or Transfer Order, this document is handed to him by the bank in trust under the terms of the original Trust Letter. Should no original Trust Letter be in existence, it is necessary to establish one. The bank then has to watch for the proceeds, which ought to be paid in by the customer within a reasonable time after delivery of the cotton to him. If goods are sold C.I.F. the proceeds should be paid in on the same day or within two days ; proceeds of other sales within ten days. When the proceeds of the cotton are paid into the bank, they are credited to the customers' account specified on the Trust Engagement, and the accommodation given by the bank is thus discharged. One great safeguard which applies in the case of advances against American cotton is that all im- ports of cotton are, or should be, hedged by sales of " Futures " ; thus, if the importer buys 100 bales in the Southern States of America, he simultaneously sells 100 bales in the Liverpool " Future ' market, so that whether the market rises or falls, he can only be slightly affected. As regards the " position ' or maturing date of such " Future ' contracts, this is left to the experience and judgment of the merchant. When the merchant sells " Spot " cotton, he cancels his " Futures " by buying them in. It may here be remarked that the fundamental idea of " Futures " was to cover the buying of cotton : they were never intended for gambling purposes. The same system applies also, to a certain extent, to Egyptian cotton, and other cottons are now covered by selling American Futures. 2— (1819) 10 bankers' advances against produce Cotton has been taken as an illustration because the machinery for dealing with acceptances and advances against cotton is probably more highly developed than in the case of any other produce. The course, however, of the financing of any other produce, such as rubber, coffee, wheat, provisions, etc., is very similar, perhaps the main difference being that in the case of other produce the proportion of drafts drawn upon the banker is not so great as those drawn upon the importer and that the system of hedging by future contracts is less developed. For instance, it is very seldom indeed that drafts are drawn on bankers in connection with the import of provisions from Canada and the States. In the case of produce from the Levant, drafts are drawn, to some extent, upon the importer's banker, but this is not frequently the case in other markets, such, for instance, as the wheat market. From what has been said it will be seen that various elements demand consideration if a banker is to conduct safely the business of financing produce. These elements, which we will now deal with in order, are as follows — 1. Stability and experience of the Bank's Customer. 2. Stability and experience of the Shipper. 3. Bill of Lading. 4. Marine Insurance. 5. Warehousekeeper. 6. Fire Insurance. 7. Customer's Trust Letter or Engagement. 8. Delivery Order and/or Transfer Order. 9. Market for the particular produce under con- sideration. 10. Special considerations affecting special com- modities. HOW ADVANCES ARE ARRANGED 11 Stability and Experience of the Bank's Customer. It would be a mistake for a bank to finance produce business for anyone who is not well known to the banker and completely trusted. It would also be a mistake to finance produce for a man who, however honest, has no capital of his own, for the value of produce fluctuates from day to day, and if a man has no capital he cannot, in a falling market, maintain the margin which the bank requires in its security. Again, the customer must have experience of his market. The bank can only watch the general tendency of markets and check the value of produce by quotations in the newspapers or trade circulars, but there are other risks against which a bank can only be guarded by the experience of its customer. Take cotton, for instance. An importer, through want of experience or judgment, may make the mistake of importing nothing but long staple cotton, which in certain states of the market, is extremely difficult to realize ; or again, take the case of lard or canned goods, such as tinned salmon. There may be such a heavy catch of salmon in the particular year when the transaction takes place that an importer is making a mistake if he imports heavily ; or Singapore pines imported, and the summer turns out wet and cold ; or similarly, the lard market, in which there is a certain amount of speculation (in lard there is now a Future market the same as in cotton), may be manipulated to the great disadvantage of anyone actually holding lard. These, and similar considerations, are con- stantly arising, and the banker's chief protection against loss is the experience and judgment of his customer. Accordingly, the all-important condition of successful financing of produce is to finance only 12 bankers' advances against produce for customers upon whom the bank can rely in regard to character, experience and means. Shipper. While the bank's credit is not accorded to the shipper, but to the bank's own customer, it is very important that the shipper should be a reliable party, and it is well for the banker not only to discuss this point with his customer, but to make enquiry at the beginning of the season about the standing and responsibility of the various shippers upon whose shipments he will have to depend for security. Bill of Lading. This is the banker's prime security, and it is important that he should feel able to rely upon its genuineness, and upon the responsibility of the carrier, or carriers, whose obligation it bears. In the case of a Through Bill of Lading, the position is more satisfactory to-day than it was before the great frauds in America some years ago, inasmuch as rail- roads in America have adopted a system of oversight in regard to the issue of Bills of Lading which did not exist before, and Through Bills of Lading must always now have attached to them Validation Certificates (see Appendix, form R), testifying to the genuineness of the signature of the railroad agent, signing the Bill of Lading. Further, the responsibility of the railroad is practically unquestionable. In the case of a ship's Bill of Lading, theoretically there is no protection against the issue of a forged Bill of Lading. In practice, however, the cases of forgery are so few a6 to be negligible. The great protection that bankers have is that a Bill of Lading fraud, especially in connection with a ship's Bill of Lading, HOW ADVANCES ARE ARRANGED 13 is bound to come to light so soon that it is a dangerous fraud to attempt, and cases of forgery of Bills of Lading are extremely rare, quite as rare as, if not more so than, the forgery of Bank of England notes. Not- withstanding this, the Produce Security Department of any bank giving accommodation against Bills of Lading, ought always to be on the look-out for, and call for explanation of, any irregularities in a Bill of Lading. With reference to the responsibility of the ship in the case of a ship's Bill of Lading, the fact that a ship can be arrested if the goods are not forthcoming, and would only be released on bail being furnished, is a great protection to the holder of a Bill of Lading. Marine Insurance. Marine Insurance is a vital point. The banker ought always to have either a policy or a certificate of insurance, or some other form of covering note of Lloyd's Underwriters or some good Insurance Com- pany. If the names of continental companies are offered, the bank ought to make full enquiry as to their responsibility before accepting their policies. The policy or certificate, etc., ought also to be indorsed in blank so as to put the banker in a position to collect any claim arising thereunder. The customer will sometimes give a letter stating that he is attending to Marine Insurance, and this usually is taken as satisfactory, if the customer is strong. Warehousekeeper. The warehousekeeper may be either a dock or canal authority, a railway, a limited company, a private firm, or an individual. The Mersey Docks & Harbour Board, some of the London Wharves, some 14 bankers' advances against produce other dock authorities and some private firms have power to issue warrants in favour of the parties lodging the goods, or their bankers, and when delivery is required, these have to be indorsed and surrendered to the Issuing Authority in exchange for delivery of the goods. Such warrants can only be legally issued under a special Act of Parliament, and therefore when a warrant is handed to the bank, the bank ought always to ascertain whether the party issuing it has obtained the necessary statutory authority. In all other cases the document of title is not a warrant but a warehousekeeper's receipt, which must be made out in favour of the bank itself, and should contain a clause that the receipt is subject only to a charge for rent on the specific goods named therein. It will not do to take a receipt in favour of the customer and indorsed by him, because such indorse- ment does not pass the title in the goods. When delivery is required under the Warehouse Receipt, a Delivery or Transfer Order must be signed by the bank in favour of its customer, and when all the goods have been delivered, the Warehouse Receipt, although valueless, ought to be kept by the bank for some little time in case enquiries should arise regarding it. If the warehousekeeper is a private firm or individual, the bank ought to satisfy itself that he is a reliable party to be entrusted with the custody of goods. Periodical enquiries should be made ; this is important. Fire Insurance. Fire Insurance, like Marine Insurance, is indis- pensable, except in the case of one or two classes of goods which are not inflammable. Usually the bank takes customers' undertaking to insure and only occasionally receives the Fire Policy, or Covering HOW ADVANCES ARE ARRANGED 15 Note. This ought cither to be made out in the name of the bank, or having been made out in the name of the customer, ought to be specially indorsed with the banker's clause, which reads as follows— "£ of the Insurance by this policy is limited to apply to Merchandise only as within described in which the Insured and Messrs are jointly interested as Merchants, and Brokers or Bankers respectively. " Subject separately to the Conditions of Average. " If, however, at the breaking out of a fire the value of such Mechandise be less than the total Insurance limited to apply thereto, under this and other specific policies, then the excess Insurance shall be deemed to have reverted to the Insured in terms as within stated. " In the case of two or more concurrent Insurances, the excess Insurance which shall revert under this policy shall be in rateable proportion to the total of such concurrent Insurances." Customer's Trust Letter or Engagement. The next item is that of Customer's Trust Letter or Engagement. There is no point in connection with produce financing which has been subjected to so much criticism as the Trust Letter, and yet in no reported case has a Trust Letter, it is thought, been the subject of legal decision in the highest courts of the land. What can be Claimed for a Trust Letter properly drawn is that, so far, its efficacy as a lien over the goods and the proceeds has never been disputed. It does, in practice, enable the bank to follow the goods and the proceeds, even in the case of the bankruptcy of the party who has entered into the Trust Engage- ment, unless indeed the purchaser has already paid 16 bankers' advances against produce the proceeds, and these have been misapplied by .the bank's customer instead of being paid in to the bank under his Trust Letter, or unless the buyer of the goods was, at the same time, a creditor of the bankrupt who is debtor to the banker in respect of the said goods, in which case the buyer can legally set off one debt against the other, and the proceeds of the goods may thus fail to reach the bank. The great danger about Trust Letters is the danger of fraud on the part of the bank's customer who has entered into the Trust. He may receive the proceeds, and instead of paying them in to the bank, may divert them to other uses, or instead of paying them in to his Advance, or other Special Account, he may pay them in to his ordinary Current Account and draw them out again. The only safeguard is (1) to see that the Trust Letter itself is in proper form ; (2) for the Produce Security Department of the bank to watch carefully that no proceeds get into arrears. Should it be found that Trust proceeds are being paid into an account other than that specified in the Trust Engage- ment, the attention of the customer should at once be called to the irregularity. The fact that misappro- priation of the goods, or proceeds of them, is a penal offence, is a further safeguard. The amount outstanding entrusted to any one customer ought not to be excessive ; in fact this particular class of security has to be most carefully watched and kept within moderate limits. The Trust Letter, however, is a most useful and, indeed, indispensable feature in connection with produce advances, and in spite of the fact that large frauds have occurred in connection with Trust Letters, they cannot be dispensed with. Such frauds are fortunately very rare, and can, to a very considerable extent, be guarded against. HOW ADVANCES ARE ARRANGED 17 Delivery a n (,i ; 85 cither actually or constructively, of the goods, and therefore they could not create any trust thereon ; the Bills of Lading appear to have been made out in favour of the customers' order [i.e., the firm abroad), and apparently the plaintiffs only had duplicate Bills of Lading in their possession. The customers had consequently the sole property in the goods, subject only to the possible right on the part of the defendants to stop in transitu. In these circumstances, it is difficult to see how any valid charge or mortgage on the goods could be given to the plaintiffs. As regards the hypothecation upon the proceeds of the goods, the proceeds were the invoice value to be paid by the customer, and that seemed to be a book debt owing by the customer to the defendants. It was said that when the money got into the hands of the defendant company, or into the hands of the liquidator, it was impressed with a trust in favour of the plaintiffs. His Lordship said, it seemed to him that there was a charge upon the money which, until it was paid to the defendants, was a book debt, and it was because it was a book debt that, when received, it was impressed with a trust, if it ever became so impressed. In these circumstances, it was a charge within Section 93 of the Companies (Consolidation) Act, 1908, and as it was not registered it was void against the liquidator. The simplest way by which Ladenbergs could have covered themselves would have been for Messrs. Goodwin to have drawn drafts upon their customer at a certain tenor, with the Bills of Lading attached thereto, the Bills of Lading being to Goodwin's order and indorsed by them in blank, the drafts and Bills of Lading being then handed to the bank for collection, 86 bankers' advances against produce the bank allowing Goodwins to draw against the bills so held, and the bank would then have had a lien on the bills to the extent of any overdraft granted. Bills of Lading indorsed in blank by the customer are sometimes handed to the bank for the bank to send to some foreign town to be surrendered against payment of a stated sum. Any advance granted by the bank against the shipping documents thus received would be covered by the bank's lien on the property represented by the documents, and on the proceeds. Advances against Imported Produce (Amount Advanced being Cabled). With the great facilities now offered for cabling money, amounts are frequently cabled to foreign towns to be paid to certain firms against the surrender of shipping documents representing certain goods. These documents should always be drawn to the shippers' order, and be indorsed by them before being sent over to this side. In the case of some goods, viz. : food stuffs, the documents will be Bill of Lading, Examiners' Certificate and Marine Policy. The customer signs a letter instructing the bank to cable to their agents at the foreign town to negotiate under the bank's guarantee the drafts of A. Y. & Co., drawn either upon the bank or upon the customer, as may be arranged, if presented to the agents on or before a certain time, the drafts to be drawn at sight, payable in London, to the aggregate extent of £ for invoice value or part invoice value of shipment of x cases of merchandise to Liverpool, for which the Bills of Lading to " order," hypothecated to the bank in the usual way for the bank's security, are to accompany the drafts, and in consideration of the THE PLEDGE 87 bank so doing, the customer engages to pay, on presentation, all drafts drawn on them so negotiated by the agents, or to provide the bank with cash funds to meet all drafts upon presentation drawn upon the bank and negotiated by the agents, and the customer charges the merchandise represented by the said documents with the repayment of the amount of the said drafts with interest, commission, and all charges, and gives the bank full discretionary power of sale over the merchandise at such times, either before or after arrival, as the bank may deem fit. The customer will further state in his letter that the Marine Insurance will be taken out either by himself or by the shippers, and that War Risk will be covered, and he undertakes to hold the Marine Insurance and War Risk Insurance in trust for the bank, and in the event of loss in due course to recover and receive the Marine Insurance moneys and War Risk moneys and pay the same to the bank as and when received. The customer will state that their engagement to pay shall continue in force, notwithstanding any changes in the individuals composing the respective firms, and that no responsibility is to attach to the bank or the bank's agents as to documents, beyond seeing that they purport to be in order, and they agree to hold the bank and the bank's agents harmless in respect of any loss or damage that may arise in consequence of error or delay in transmission of the bank's or the agents' messages, or misinterpretation thereof, or from any cause beyond the bank's or the agents' control. Advances against Imported Produce (not Cabled). In the first chapter a broad outline of how advances against produce were carried through is given ; in 88 bankers' advances against produce the second chapter we discussed the details of the Factors' Act of 1889, and touched briefly upon the Sale of Goods Act, 1893. In the next chapter we discussed, the significance of the various documents of title. In this chapter Hypothecation, Lien, and Pledge are dealt with, and we will now see how the various documents are deposited, how the bank safeguards itself, and how the overdrafts granted are liquidated. The simplest form of advance is when the customer says " I will deposit with you this Bill of Lading representing such and such goods," or, " I will store in your name such and such goods and will hand you the Warehousekeepers' Receipt, and I will pay you cash against each Delivery Order or Transfer Order I require, until I liquidate the advance." But the transaction does not often take this form, and so methods have been devised, and suitable forms drafted, to meet other conditions which arise. You will quite understand that the procedure outlined refers only to that employed by a particular bank, and the forms explained are those in daily use, but they are more or less identical with those used by other banks who advance against produce. (For copies of the forms referred to see Appendix.) The borrower fills in an " advance application " letter, 1 in which he enquires if the bank will advance to him and on what conditions, the sum of £ against property, the particulars and value of which are listed at the foot of the letter, and the borrower undertakes to repay on or before a certain date. He informs the bank that he will effect the Fire Insurance on the property, and in the event of loss will hand the amount received from the insurance to the bank. The price which the borrower must insert in the 1 See Appendix, Form A. THE PLEDGE 89 application must be the market price of the day. It happens sometimes that the applicant, having sold the goods, fills in the contract price, but this is not sufficient. What the bank requires is the price which the goods would bring in the market if it became necessary for the bank itself to realize. If the goods have been sold, the particulars of sale, viz. : buyer's name and contract price should also be inserted. Usually on produce advances a margin of 10 per cent, to 20 per cent, is required. This varies, however, being governed by the marketability of the produce. The advance is granted for a term not exceeding three months. This time is fixed so as to afford an early opportunity for reviewing the condition of the advance, the security and the market. Of course, the produce loan department watch the market day by day, and report to the management anything calculated to cause anxiety. Should the security be a Bill of Lading, endeavour to get the full set. We discussed the reason for this in the previous chapter, but as this is sometimes not possible, find out where the remainder of the bills are and keep a look out for them. Should the goods arrive before the Bill of Lading, as may happen, the bank sometimes joins with the customer in giving the shipowner an indemnity, under which delivery of the goods is obtained without production of the Bill of Lading. This should be done but rarely and with caution. It will be found convenient not to have a general advance account in which all advances for the customer are entered, but a series of accounts — advance No. 1, advance No. 2, and so on — the records of which can be kept separately, and the proportion of security to advance accurately watched. 7— (1819) 90 bankers' advances against produce While it is held true no document is legally necessary to establish a banker's general lien over all the securities lodged by a customer, whether originally connected or not with the specific advances comprised in the customer's total indebtedness to the bank, it is well to place the matter entirely beyond question, and to impress the fact on the customer by taking from him a General Lien Letter. (See Appendix, Form P.) As soon as each individual advance is paid off by the proceeds of sales, or otherwise, the account should be made up at once, and the charges debited to the customer's current account, and the specific advance ruled off. In the forms used by the bank for the purpose of establishing a trust under which the sale of the produce may be effected and the proceeds paid into the bank, it should be noticed that although the forms are regulated to a certain extent by the nature of the security, they are all drawn with a view of establishing the ownership by the bank of all the documents, the produce and the proceeds, and the obligation on the part of the borrower to hold all the documents, produce and proceeds, in trust for the bank. The forms further stipulate that the borrower shall insure against Fire Risk, and in case of loss, pay the insurance money to the bank. The security tendered may be in several forms, viz. — 1. Bill of Lading. 2. Dock Warrants, Warehousekeepers' Warrants, or Warehousekeepers' Receipts. 3. Transfer Orders. 1. The customer having applied for an advance THE PLEDGE 91 on Form A, 1 may at that point be able to bring the Bill of Lading with him, but it very frequently happens that he requires to draw the money from the bank to lift the Bill of Lading elsewhere ; the bank accordingly, in that case, makes the advance without any security for the moment. The Bill of Lading is then brought to the bank, and the bank hands it back to the customer, on the arrival of the goods, accompanied by a letter in Form " B " or Form " C." Form " B " is used where the property is going to be stored in warehouse, and the Warehousekeeper's Receipt in the name of the bank handed to the bank. Form "C" is used where the property is going to be sold ex Quay, or where sale is so imminent that the bank agrees to allow the customer to retain custody of the property. To each of these letters "B" and "C" is appended a form of acknowledgment for the customer to sign and return to the bank, which, it will be seen, is a definite engagement to carry out the bank's instructions. The customer's acknowledgment is technically known as a " Trust Engagement " or " Trust Letter." In the event of Form " B " having been used, the Warehousekeeper's Receipt in due course is handed to the bank. In some cases the bank sends the Bill of Lading direct to the warehousekeeper with a letter (Form ' K ") instructing the warehousekeeper to claim, warehouse, and hold the property in the name of the bank, and the warehousekeeper acknowledges receipt of the documents in a form provided by the bank, undertaking to carry out the bank's instructions. It may happen that part only of the goods represented by the Bill of Lading have arrived ; in that case the warehousekeeper returns the Bill of Lading to the 1 See Appendix. 92 bankers' advances against produce bank marked with the portion delivered, so that the balance of the property may be dealt with on arrival later on. As soon as the warehousekeeper has claimed and stored the goods and handed his receipt to the bank, the bank at once sends to the customer a letter (Form "J ") so as to put in writing the conditions on which the advance is made, and receive in due course the " Trust Engagement " appended thereto, duly signed by the customer. 2. In the event of the advance being made against Warehousekeeper's Receipt, Warehousekeeper 's Warrant, or Dock Warrant, the customer makes application on Form "A," but instead of Form " B " or Form " C," the bank's Letter of Instructions is issued in Form " J." This form also establishes a Trust. 3. When Delivery or Transfer Orders are tendered as security Form " L " is used. In most cases the bank at once lodges the order with the warehouse- keeper for the goods named therein to be stored in the bank's name ; occasionally the document is handed back again to the customer to be dealt with by him. The goods, sooner or later, will be sold or the advance paid off out of other money and a Delivery Order or Transfer Order will be required ; the customer then applies for the order, either Transfer or Delivery as the case may be, using Form " D ' This form must be signed by the customer, or by some duly authorized person on his behalf, and must refer to the original Trust Letter. Against this application a Delivery Order or Transfer Order is issued on Forms ' E," " F," or " G." In the selection of the particular form of Delivery Order or Transfer Order the bank is guided, first of all, by the requirements of the particular warehousekeeper with whom the goods are stored ; THE PLEDGE 93 secondly, by the question of whether the customer wishes the goods transferred to his order in the books of the warehousekeeper or wishes to have them actually delivered. Care must be taken in the issuing of these orders that the warehousekeeper be directed to collect rent and charges before delivering or transferring the goods. The order having been signed and handed to the customer, the sale must be entered in a diary, under the date when proceeds are due, all important particu- lars being given. This diarising is most important. Should the proceeds not come in promptly, enquiry should at once be made of the borrower as to the reason for the delay, and, if necessary, he should be reminded frequently; for the maxim "Watch the proceeds" comes into play at this point, and gentleness combined with firmness in the early stages will often save the bank a bad debt, and may earn a customer's gratitude. The particulars given on the application for the Delivery Order or Transfer Order, must, of course, correspond strictly with the details on the Trust Letter. In all cases, the borrower advises the bank of the names of the people to whom he has sold the goods ; these names should be carefully scrutinized, and the bank should satisfy themselves as to the standing of the buyers. The amount for which the goods are sold should be watched with reference to the market price and an explanation received if the prices vary at all considerably, and the " prompt " should accord with the usual trade terms. The credit notes (for specimens on the various forms see Appendix) upon which the various proceeds will be paid in must contain sufficient particulars of the sale to which the proceeds relate, to enable the trans- actions to be duly recorded and marked off in the diary. 94 bankers' advances against produce There will be times when the borrower will want to withdraw the documents the bank hold, and substitute others in their place. In this case, a letter (Form " M ") is addresssed to the bank, in which the borrower refers to the bank's original Letter of Instructions relating to advance No for £ , and asks to be allowed to substitute certain property detailed in lieu of the property listed in original letter, and the terms of the original Trust Letter are revived. As regards the bank's position, reference should be made to the Factors' Act, 1889, Section 5, which is discussed fully in the second chapter. Sometimes a Delivery Order or Transfer Order is given for produce which has been sold, and it happens that the buyer refuses the goods ; the broker or the borrower will then hand the goods back to the ware- housekeeper, obtain a fresh receipt in the bank's name, and hand the receipt to the bank on the sub- stitution Form " M." This is done to re-establish the Trust, and to make quite sure should the substituted property turn out afterwards to be different from the original property. Watch carefully that any substitution is antecedent to or simultaneous with the receipt of proceeds. Substitution ought not to be encouraged. Deterioration and Rent. A sharp look out should be kept that the bank delivers every package lodged in its name in the warehouse, or it may be surprised some day by a demand for rent for some forgotten package. A case is known where a bank had some thousands of bundles of jute fibre stored, and as these bundles were, relatively speaking, small, the deliver}'' orders were generally worded " deliver 500 bundles more or less." THE PLEDGE 95 Five years after this particular advance had been closed, and the firm defunct a year or more, the warehousekeepers demanded £3 to £4 rent for some thirty bundles, which had been lying in the warehouse forgotten in a corner ; the value of the fibre being about 30s., the bank told the warehousekeepers to realize and get what they could, and as the warehouse- keepers acknowledged they had overlooked the goods, they did not press for the rent, but took possession of the fibre, and, presumably, realized somethng towards their claim. Again, a firm of grain merchants stated that some years ago they had some tons of Siberian beans stored in bulk in a warehouse, and they lay there undisturbed for three years. At last, having found a purchaser, workmen were sent to place the beans in sacks, the beans being stored in bulk. The first touch of the wooden shovel, however, caused the whole mass to collapse ; rats had burrowed in below and eaten the whole of the core, leaving an outer shell of beans which were valueless. It seems extraordinary that the beans should stand in spite of the natural vibration of the building, but such was the case, and the owners not only lost the value of the beans, but had been paying rent for three years. Death of a Partner in a Firm. Security may cease to be effectual as cover for further advances by reason of a change in the personality of the borrower. Should there be a firm with one person only trading in the firm name, it is the duty of the executors to see that the Trust Engagements are carried out, accord- ingly it is not necessary for the executors to sign any fresh letters. But if a fresh partner is introduced, and he continues to trade in the old name, he should 96 bankers' advances against produce sign any general lien letter which might be necessary. Should the advances be all taken in one account, it must not be forgotten that it may be necessary to draw a line in the account, in the event of the bank deciding that the liability of the deceased partner's estate should be preserved. Insolvency or Bankruptcy of Customer. It will be clear that if the bank's security is a Bill of Lading their position is sound, but how will the bank stand in the case of Warrants, Warehouse- keepers' Receipts, Wharfingers' Certificates and Transfer Orders ? By Clause 44 of the Bankruptcy Act, 1913, property held by the bankrupt on trust for any other person is not divisible amongst his creditors, and where a man holds property as a mere agent or factor, he will be considered to hold it as a trustee, and should he become bankrupt, his principal can claim it, so long as it is distinguishable from the mass of the bankrupt's property. The various documents of title which are handed back again by the bank to the customer, are held by that customer as agent for and on behalf of the bank and the customer signs the acknowledgment, engaging to hold the documents, or the goods represented thereby, or the proceeds thereof, as trustee on behalf of the bank, and the efficacy of a Trust Letter properly drawn, as a lien over the goods and the proceeds, has never been disputed. In the case of the North Western Bank v. Poynter Sons & Macdonald, it was held that the bank's security was not invalidated by reason of the fact that the goods had been handed back to the customer for realization on the bank's account. If this is the true position, no question as THE PLEDGE 97 to " being in the possession, order or disposition ' could arise on the bankruptcy of the customer. Lord Justice Vaughan Williams, in his work on Bankruptcy (6th Ed., 199), states that the dock owner or warehousekeeper must attorn to the holder of the documents. This may be true as regards Warehouse- keepers Receipts and Transfer Orders, but not in the case of Transferable Warrants issued by warehouse- ktvpers or wharfingers who, under special Acts of Parliament and in accordance with the terms of the warrant, will not part with the goods except on production of the warrant. As regards a Delivery or Transfer Order, this should be lodged as soon as possible with the warehouse- keeper and the goods claimed, for until this is done the goods remain in the possession, order and dis- position of the owner, and should he become bankrupt, the property will vest in his trustee. Fire Insurance. The bank should insist on having the fire insurances effected with a substantial company. If a policy of a weak company is tendered, it is a matter for con- sideration, and the question should be looked at with an eye to the position of the customer. The statement of the customer that he has effected insurance with such and such company is usually accepted. In some cases the policy is handed to the bank, it is then indorsed with the bankers' clause which reads — Indorsement No Memo : — £ ( ) of the insurance by this policy is limited to apply to merchandise only as within described in which the insured and are jointly interested as merchants and brokeis or 98 bankers' advances against produce bankers respectively. Subject separately to the conditions of average. If, however, at the breaking out of a fire the value of such merchandise be less than the total insurance limited to apply thereto, under this and other specific policies, then the excess insurance shall be deemed to have reverted to the insured in terms as within stated. In the case of two or more concurrent insurances, the excess insurance which shall revert under this policy shall be in rateable proportion to the total of such concurrent insurances. Entered in the Office Books this day of This bankers' clause is used in Liverpool, Manchester and Hull. Inasmuch as the bankers' clause describes the insurable interest as a " joint " interest, the customer has to join with the bank in making any claim under the policy. This would be inconvenient, if not dangerous, to the bank in the event of the bankruptcy of the customer. Accordingly, when a customer fails it is necessary that the bank should take out a fresh policy in its own name. In a policy in favour of the banker's customer only, there is no privity between the banker and the Insurance Company. In either case, it is essential that the goods should be insured to their full market value, such policies being subject to the Average Clause. Floating policies are used as " a blanket," covering goods on arrival for a night or so ; specific policies being taken out as soon as possible. Nearly all firms keep a " floater or two " going, and these are seldom if ever indorsed with the bankers' clause. Mil PLEDGE 99 Floater premiums are, as a rule, higher than premiums on specific policies, but grain and flour premium is the same on both floaters and specific policies. General Average. The term "General Average" (otherwise but not usually called Gross Average) expresses the contribu- tion, which by the Commercial Law of every country in Europe is made by the general body of proprietors of the ship or cargo, towards the loss sustained by any individual of their number, whose property has been sacrificed for the common safety ; as where in a storm jettison is made of any goods, or sails or masts are cut away. But to found this obligation, it is essential that the ship should be eventually saved ; and that the sacrifice so made should have, in fact, conduced to her preservation, and also that the cargo so jettisoned was laden in a proper manner ; for goods stowed upon the deck (unless where a special custom authorizes such stowage) are not the subject of General Average. The proportion which the value of the property so sacrificed bears to the entire value of the whole ship, cargo and freight, including what has been sacrificed, is first ascertained ; and then the property of each owner contributes in the proportion so found. Under the usual maritime policies the under- writers are liable for these payments made by the assured. A very common clause is " General Average payable according to York-Antwerp Rules, 1890." This refers to a code of rules settled and adopted by a series of International Conferences, including one at York in 1864, Antwerp, 1877, and Liverpool, 1890. 100 bankers' advances against produce Marine Policies. The Bill of Lading is full of clauses which exempt the shipowner from responsibility for losses of all kinds. The extent of these varies. Broadly speaking, they exempt the shipowner from liability for accidental marine losses, where there has been no negligence, but often they exempt him from liability, though the losses may have been caused by the negligence of his servants, or contributed to by such negligence. All these losses may be insured against, and persons called underwriters undertake to bear them ; the bank should see that any policy held covers all cases in which the shipowner is not liable. The liability of the shipowner is limited by the Merchant Shipping Act, 1862, Section 54, in respect of any one marine casualty to £8 per ton of the ship's registered tonnage where there is no loss of life ; and the liability is limited to £15 per ton where liability for loss of life also comes in. The policy may be for a voyage, or for twelve months. It should provide — 1. An indemnity against direct loss or damage of the goods by marine casualties. 2. Indemnity against liability to contribute to General Average, or Salvage, or to bear extraordinary expenses for the protection of the particular goods. Floating policies are taken out to cover a number of shipments of goods, the merchant not knowing, when he takes out the policy, when the goods will be shipped, the quantities, or the ships that will carry the goods. Sometimes the policy will be for a large sum to cover a number of shipments, which, as made, the merchant is bound to declare under the policy. This declaration of the shipment, showing the value of the interest in it, is indorsed on the policy, and THE PLEDGE 101 gradually the amount of the policy is exhausted. As a policy of this description cannot be attached to the Bill of Lading, certificates are issued for the specific shipment, and can be used for negotiation in place of the policy. The certificate will refer to the floating policy, will certify that the goods are held insured in accordance with its terms, and will state some of the general features of the policy such as the nature and extent of the voyage, and as to whether partial losses are or are not covered. The certificates generally state that they are to stand in place of the policy, and that the insurance moneys are to be payable to the holders of the certificates. A certificate given under a duly stamped floating policy made in the United Kingdom does not require a fresh stamp, but a certificate given under a floating policy made abroad, and so not stamped under our Revenue Laws, must be stamped in order to collect a claim in the United Kingdom as a policy within ten days of arrival in the United Kingdom at the rate of Id. per cent. The delivery of the policy or certificate to the banker is evidence of an agreement between him and his customer that the banker is to have the benefit of the insurance, and if notice of that agreement is given to the underwriters, the transaction will be binding upon them. They will at their peril pay any moneys which may be due under the policy to anyone but the bankers. The legislature in 1868 further provided that the full legal title to a policy may be assigned so as to enable the transferee to sue upon it in his own name, subject to any defences, which would be available against the transferor. A Valued Policy is one in which the value of the goods is fixed by the policy. 102 bankers' advances against produce An Unvalued Policy where no agreed valuation is made ; the policy merely describes the goods, and states that so much is insured upon them, leaving the value of the goods, or the assured interest in them, to be determined when occasion arises. APPENDIX I CASES Case 1 Inglis v. Robertson & Baxter (1898), A.C. 616 ; 67 L.J.P.C. 108; 79 L.T. 224; 14 T.L.R. 517. Section 3 of the Factors' Act, 1889, applies only to a pledge by a "mercantile agent' as denned by the Statute ; therefore, where the owner of goods in a bonded warehouse indorsed the delivery order to the appellant as security for a loan without notice to the warehousekeeper, held that the appellant's title did not prevail against that of the respondents, the unpaid vendors, who had arrested the goods. Case 2 Cole & Anor. v. North Western Bank (1874) ; L.R. ix 470. To constitute a person an " agent intrusted with the possession of goods " within the Factors' Act he must be intrusted with them in the character of such agent, that is, for the purposes of sale. If besides the character of agent he also carries on an independent business as a warehouseman, goods intrusted to him for the purpose of warehousing them are not " intrusted " to him as agent within the meaning of the Act. Case 3 City Bank v. Barrow (1880), L.R. v., 664. Where there is a power by law to sell a purchaser may obtain from the vendor, even as against the true owner, a good title, but that cannot extend by implication to a pledge. 103 104 bankers' advances against produce Case 3a Portalis v. Tetley (1867), L.R. 5 Eq. 140 ; 37 L. J.Ch. 139 ; 16 W.R. 503 ; 17 L.T.N.S. 344. Where a Mercantile Agent has pledged goods to a pledgee, but not for their full value, the goods so pledged are still within the Mercantile Agent's control, so as to enable him to pledge them for the balance of their value. They were, to quote the words of Page-Wood, V.C., " within his control, being in the possession of another person subject to his control and on his behalf." Case 3b Gunn v. Blockow, Vaughan & Co. (1875), L.R. 10 Chy., 491. Wharfinger's certificates are not documents of title, and their delivery passes no right to the goods ; and no custom of trade can give them the effect of warrants or documents of title against the vendors. Case 4 Hardman v. Booth (1863), Hurlstone & Coltman's Reps., Vol. I, 803. W T here goods are delivered to a person who is not in fact authorized to receive them as agent, no property passes, and such unauthorized person is not " intrusted with the possession of goods ' within the Factors' Act ; a pledgee of such goods selling under his power of sale will be liable to the true owner for the amount realized by the sale. APPENDIX I 105 Case 5 Fuentes v. Montis and another (1868), L.K. 4 C.P. 93. An agent " entrusted with and in possession of goods or of the documents of title to goods " within the Factors' Act is a person who is entrusted as agent for sale ; and consequently one whose authority to sell has been revoked cannot make a valid pledge of goods which had been entrusted to him for sale, but which have been wrongfully retained after his authority has been revoked and the goods demanded from him by his principal. Case 6 Sewell v. Burdick (1884), 10 Ap. Cases, 74. The mere indorsement and delivery of a Bill of Lading by way of pledge for a loan does not pass " the property in the goods " to the indorsee so as to transfer to him all the liabilities in respect of the goods within the meaning of the Bills of Lading Act {e.g., for the freight). Case 7 Lickbarrow v. Mason (1786), Smith's Leading Cases, 1, 693 (11th Ed.) The Vendee of goods may by assignment of the Bill of Lading to a bona-fide transferee defeat the vendor's right to stop them in transitu in case of the vendee's insolvency. The consignor may stop goods in transitu before they get into the hands of the consignee in case of the insolvency of the consignee ; but if the con- signee assign the Bill of Lading to a third person for valuable consideration, the right of the con- signor as against such assignee is divested. There is no distinction between a Bill of Lading indorsed in blank and an indorsement to a particular person. 8— (1819) 106 bankers' advances against produce Case 8 Myerstein v. Barber (1866), L.R. 2 C.P. 38 ; A.C. 4, 317. A Bill of Lading remains in force until there has been a complete delivery of the goods thereunder to a person having a right to receive them, and is not spent or exhausted by the landing and ware- housing them at a sufferance wharf — at all events so long as they are under a stop for freight. " There can be no complete delivery of goods under a Bill of Lading until they have come into the hands of some person who has a right to possession under it." The person who first gets the Bill of Lading (though only one of a set of three) gets the property which it represents, he need not do any act to assert his title, which the Bill of Lading itself renders complete, and any subsequent dealings with the others are subordinate to the rights passed by that one. Case 9 Glynn v. East & West India Dock Company (1882), 7 App. cases, 591. Where goods were shipped under a Bill of Lading drawn in parts, to be delivered to the consignee " or his assigns, the one of which Bills being accomplished the others to stand void," the master or the warehouseman who has the custody of the goods under the Merchant Shipping Act, 1802, is justified in delivering on production of one part, although there has been a prior indorsement for value to the holder of another part ; provided delivery be bona-fide and without notice of such prior indorsement. APPENDIX I 107 Case 10 Porteus v. Watncy (1878), L.R. Q.B.D. 3, 534. A charterer is liable for demurrage although he is prevented from getting his goods by the delay of other consignees. Case 11 Wegener v. Smith (1854), Common Bench Reps. 15, 285. The acceptance of a cargo by the indorsee of the Bill of Lading whereby the goods were deliverable to order " against payment of the agreed freight and other conditions as per Charter Party " is a circumstance from which the jury may imply a contract on his part to pay demurrage stipulated for by the Charter Party, notwithstanding his refusal at the time of receiving the goods to pay the demurrage. Case 12 Chappel v. Comfort (1861), 10 Common Bench (N.S.) 802. Where cargo was deliverable to the consigner, " he or they paying freight as per Charter Party," and in the margin of the Bill of Lading appeared the words " there are eight working days for unload- ing " : held, that the consignees by accepting the Bill of Lading incurred no liability for demurrage, although the vessel was detained for four days beyond the time mentioned. 108 bankers' advances against produce Case 13 Cox, Patterson & Co. v. Bruce (1886), 18 Q.B.D., 147. Where a Bill of Lading contained the following provision " If quality marks are used they are to be of the same size as the leading marks and contiguous thereto, and if such quality marks are inserted in the shipping notes and goods are accepted by the mate, Bills of Lading in conformity therewith shall be signed by the captain, and the ship shall be responsible for the correct delivery of the goods " ; held, on the facts that an indorsee of the Bill of Lad ing without notice of the incorrectness of the description of the marks therein, had no right of action against the shipowner either for breach of contract or upon the ground that they were estopped by the representation in the Bill of Lading. Case 14 Parsons v. New Zealand Shipping Company (1901), 1 Q.B. 548, 17 T.L.R. 274. Where a shipowner tendered goods to the holder of a Bill of Lading bearing different marks from those appearing in the margin of the Bill of Lading: Held, that Section 3 of the Bills of Lading Act, 1885, did not estop the shipowner from showing that the goods tendered were in fact part of the goods shipped under the Bill of Lading, the difference in the marks affecting merely the identification and not the identity of the goods. Case 15 Hyman v. McLintock (1907), Scotch L.R. xliv, 691. The transfer of a Bill of Lading constitutes a good security valid against a trustee in bankruptcy ; but the claim of the trustee is preferable to that of the holder of store warrants and delivery orders. APPENDIX I 109 Case 16 M'Ewan v. Smith (1849), 2 House of Lords Cases, 309. The giving of a delivery order does not, without some positive act done under it, operate as a constructive delivery of the goods to which it relates, nor deprive the owner of the goods who gave it of his right of lien for their price, even as against the claim of a third party who has bona-fide purchased them from the original vendee. Blackburn on Sale (p. 302). Case 17 North Western Bank v. Poynler, Son & Macdonald (1895) A.C. 56. The pledgors of a Bill of Lading representing a specific cargo were under contract to sell a larger quantity of like goods to third parties. The pledgees (the bank) returned the Bill of Lading to the pledgors, to obtain delivery of the merchandise, and sell on the pledgees' behalf, and account for the proceeds towards satisfaction of the debt. It was held that the pledgees' security was not affected, and that they were entitled to the proceeds of the cargo, as against general creditors of the pledgors who had attached them. In the law of Scotland as in the law of England, a pledgee may re-deliver the goods to the pledgor for a limited purpose without thereby losing his rights under the contract of pledge. APPENDIX II FORMS ADVANCE APPLICATION. Form A. Liverpool, 19.. To the BANK OF X, LIMITED. Be good enough to inform mejus if the Bank will advance tome/us, and if so on what conditions, £ against the undermentioned property, the value of which is stated at foot ; which advance, if made, I jwe engage to repay on or before the next. Fire Insurance on said Property will be duly effected by mejus, the amount of which in the event of loss, will be handed to you. Advance Account No. PARTICULARS OF PROPERTY. Marks. Property. Weight. Prii e. 1 Net Value Ship. Warehouse. 112 B/L. Insce.— W'house, &c. Form 15. BANK OF X, LIMITED, LIVERPOOL, 19.... To M / enclose Bill.. ..of Lading for and I request you to hold the same and the property represented thereby as trustee... for thisBank, and I direct you to deal with the said properly and net proceeds thereof in the following manner ; You are to warehouse the said property in the name of this Bank (save and except such part of the property, if any, as may be sold by you before the same shall have been warehoused) and to hand me in due course Warehouse Receipt for the property so warehoused. You are to sell the said property {either before or after it has been warehoused in the name of this Bank) as the agent of, and for account of this Bank. If the said property or any part thereof shall be sold by you before it has been warehoused, you are to pay, specifically and directly to this Bank, the net proceeds thereof, immediately on receipt, to the credit of. account, accompanying each of such payments by a credit note in the enclosed form. If at any time, or from time to time, after the said property or any part thereof shall have been warehoused in the name of this Bank, you shall be entrusted by this Bank with any delivery order or other document entitling you to the possession or control of the said property, or any part thereof, you are requested to hold such delivery order, or other document, and the property represented thereby, in trust for this Bank and, when any sale of the said property has been effected by you, I request you to pay the net proceeds thereof specifically and directly to this Bank, immediately on receipt, m the same manner as directed above with respect to the proceeds of any property sold before being warehoused. You are also requested to keep the said property fully covered by Insurance from fire in trust for this Bank and to recover and receive any Marine or Fire Insurance moneys which may become due in respect of the said property and to pay the same 'specifically and directly to this Bank, immediately on receipt, in like manner as proceeds of sales. You are also at any time, and from time to time, whilst any of the above- mentioned documents or property remain in your possession or under your control, immediately upon request by this Bank, to return to this Bank such documents or deliver to this Bank or to its nominee such property, against payment to you of any necessary disbursements actually made by you on account thereof. Your confirmation on the annexed form will oblige, For the Bank of X, Limited, Manager. For form of credit note see back hereof. 113 o> 03 I O o u u <3 w H O 55 Q 55 < o z w h o *-»? <-tf z o 5 « o C/3 > o (/) Q O c OS w > • hi z _o « 55 < o o OS w > 55 o W3 W w u US OS < c/3 w H O 55 z < w p V* 55 v. 114 Form B. (copy.) BASK OF X, LIMITED, LIVERPOOL 19... / enclose Bill.... of Lading for and I request you to hold the same and the property represented thereby as Trustee.... for this Bank, and I direct you to deal with the said property and net proceeds thereof in the following manner ; You are to warehouse the said property in the name of this Bank {save and except such part of the property if any, as may be sold by you before the same shall have been warehoused) and to hand me in due course Warehouse Receipt for the property so warehoused. You are to sell the said property (either before or after it has been warehoused in the name of this Bank) as the agent of, and for account of this Bank. If the said property or any part thereof shall be sold by you before it has been warehoused, you are to pay, specifically and directly to this Bank, the net proceeds thereof, immediately on receipt, to the credit of. account, accompanying each of such payments by a credit note in the enclosed form. If at any time, or from time to time, after the said property or any part thereof shall have been warehoused in the name of this Bank, you shall be entrusted by this Bank with any delivery order or other document entitling you to the possession or control of the said property, or any part thereof, you are requested to hold such delivery order, or other document, and the property represented thereby, in trust for this Bank and, when any sale of the said property has been effected by you, I request you to pay the net proceeds thereof specifically and directly to this Bank, immediately on receipt, in the same manner as directed above with respect to the proceeds of any property sold before being warehoused. You are also requested to keep the said property fully covered by Insurance from fire in trust for this Bank and to recover and receive any Marine or Fire Insurance moneys which may become due in respect of the said property and to pay the same specifically and directly to this Bank, immediately on receipt, in like manner as proceeds of sales. You are also at any time, and from time to time, whilst any of the above- mentioned documents or property remain in your possession or under your control, immediately upon request by this Bank, to return to this Bank such documents or deliver to this Bank or to its nominee such property, against payment to you of any necessary disbursements actually made by you on account thereof. Your confirmation on the annexed form will oblige, For the Bank of X, Limited, Signed Manager. For form of credit note see back hereof. Liverpool, 19.... To the Bank of X, Limited. I /we acknowledge the receipt of your letter to mejus, of which the foregoing is a copy, with the Bill.. ..of lading and of Marine Insurance therein mentioned, and, in consideration of receiving the same, Ijwe undertake and declare that I /we will deal with the several documents, property, proceeds and Insurance moneys referred to in your said letter in accordance with your directions therein contained. 115 * 2 «5 1 1 i o o o o < e p w « 33 ■ft. bo C/3 w H O Q < o 35 <-*» >-*i 55 O Id > o > O b. < P O a; > :* a z o. in «! m o o p. > O en W D w o M en D H < (/) W H O 2 W P M W r,fa J < « « o - OJ ►J « ^ •s u S ■ft. I u 6. O u 116 B/L. and Insce. Form C. BANK OF X, LIMITED, LIVERPOOL, 19. To M. I hand to you herewith Bill of Lading for on the express understanding that you are to hold said Bill of Lading, of Marine Insurance, the property represented thereby, and the net proceeds thereof, respectively, in trust for this Bank ; and on the further understanding that you will not part with the said Bill of Lading, or of Marine Insurance or property for any purpose whatever (except in accordance with the customary course of business, for the purpose of obtaining possession of such property and/or warehousing the same and/or delivering the same to the purchaser thereof or enabling him to obtain possession thereof) but will retain the entire control of the said documents and property respectively, and hold the same as Trustee for this Bank, and further that you will pay the net proceeds of all sales and insurances specifically and directly to this Bank, immediately on their receipt, to the credit of. account, and that you will keep the property fully covered by Insurance from fire in trust for this Bank, and that you will, in the event of loss, recover, receive, and apply the Insurance money in like manner as proceeds of sales ; and further that you will at any time upon the request of this Bank return to it the said Bill of Lading and of Marine Insurance, or deliver to this Bank, or to its nominee, the said property or such portion thereof as shall remain unsold, against repayment of any necessary disbursements actually made by you on account thereof ; and further that if all or any part of the property represented by the said Bill of Lading, and of Marine Insurance shall, under instructions from this Bank or otherwise, be obtained by you, and warehoused in the name of this Bank, pending sale and delivery to a purchaser, the conditions and directions herein contained and your acknowledgment and undertaking on the form annexed shall apply to all such delivery orders or other documents relating to the property so warehoused as shall be received by you from this Bank and to the property represented thereby and to the net proceeds of all sales thereof ; and I hereby direct you to pay the net proceeds of all sales and marine and fire insurances of the said property specifically and directly to this Bank, immediately on their receipt, to the credit of the said account, accompanying each payment by a Credit Note in the enclosed form. (Copy of form on back hereof.) For the Bank of X, Limited, Manager. Please acknowledge receipt hereof on the form annexed. 117 o 2 03 ■« H o g B o u < Q H 6J e G S •ft. 1 I . ^ >• 2: O mj >-♦? to to M 'X o O o OS to < P o ►J < o i 2 < CO ►J •< a > H Id D > < G-' '" c o J H * 2 (X en 2; o to W H fc to O s ° £ w ILLS, a Other Liverpi < 2 > < o o c c to u J ffl 1 ■a. 118 (coty.) Form ('. BANK OF X, LIMITED, LIVERPOOL 19... To M / hand to you herewith Bill of Lading for on the express understanding that you are to hold said Bill of Lading, of Marine Insurance, the property represented thereby, and the net proceeds thereof, respectively, in trust for this Bank ; and on the further understanding thai yon will not part with the said Bill of Lading, or of Marine Insurance or property for any purpose whatever (except in accordance with the customary course of business, for the purpose of obtaining possession of such property and/or warehousing the same and/or delivering the same to the purchaser thereof or enabling him to obtain possession thereof) but will retain the entire control of the said documents and property respectively, and hold the same as Trustee for this Bank, and further that you will pay the net proceeds of all sales and insurances specifically and directly to this Bank, immediately on their receipt, to the credit of. account, and that you will keep the property fully covered by Insurance from fire in trust for this Bank, and that you will, in the event of loss, recover, receive, and apply the Insurance money in like manner as proceeds of sales ; and further that you will at any time upon the request of this Bank return to it the said Bill of Lading and of Marine Insurance, or deliver to this Bank, or to its nominee, the said property or such portion thereof as shall remain unsold, against repayment of any necessary disbursements actually made by you on account thereof ; and further that if all or any part of the property represented by the said Bill of Lading, and of Marine Insurance shall, under instructions from this Bank or otherwise, be obtained by you, and warehoused in the name of this Bank, pending sale and delivery to a purchaser, the conditions and directions herein contained and your acknowledgment and undertaking on the form annexed shall apply to all such delivery orders or other documents relating to the property so warehoused as shall be received by you from this Bank and to the properly represented thereby and to the net proceeds of all sales thereof ; and I hereby direct you to pay the net proceeds of all sales and marine and fire insurances of the said property specifically and directly to this Bank, immediately on their receipt, to the credit of the said account, accompanying each payment by a Credit Note in the enclosed form. (Copy of form on back hereof.) For the Bank of X, Limited, Manager. Liverpool 19.... To the Bank of X, Limited, I /we acknowledge the receipt of your letter to me/us of which the foregoing is a copy, with the Bill of Lading and of Marine Insurance therein mentioned and, in consideration of receiving the same, 1 jwc undertake and declare that I /we will deal with the several documents, properly, proceeds and Insurance moneys referred to in your said letter in accordance with your directions therein contained. •IS o e H a 2 O h o <♦-. ©• H 1-1 -ie a § w OS CQ o t I 2 &3 ■$ « *. C/3 W H O P ►4 O •-^ *■*?' z o Id X Id > O o lb ►J <: Q O a > z o^ ■f. PQ ►J O o c w > o t/3 > ►4 C/3 w u i— i ^ ,-1 , Z O in OS W PS o z o H •< PS w H ►J H X o PS >< 0. o o ■a c 1 © pi w c* w - W H & © - - © w i * .a "8 5 -a !? ° 3 s-^ * o m a 111 •&M . fe~-2-2 ~S~ « G w * 2 o h o W 8 H So »J o £'£ da *^*o W 3 C/3 Oh O K u 05 o H O z o PS (J in W Q 9 o ■< a. 13 8 e o a! •8 ■o o 34 1.5- II; 1 41 U 3 a a Sf c/5 ■2 S 3 1 K ^i %j !2 Ml ^ %- *3 CS o ■» a *> t85 = '3 2 «-2 ■° «'*■*: 111! 5 o ** ^ a O « "> "S '*''> ."> »> C fe t fe5 52.S «,«S'i!'« a a "S .Z 18 ? "-s S -s f 2> ^a°* ~ >, 5 « o I 1 I I R 1 5 ONiaaaoxaiON gsnoqsiBAN Xq u« pang s <\ °1 125 H O z So hZ M H as o 2 H O 2 O H a, ►— < OS <_> w Q a bo — C/5 o H ■< 126 © a •- o ■— w w Q O w 3 H H X O O o « a .§ 8 H SB O W Q < 55 W pa H w 55 W < « o O H < « W H < O - © - - w a W - © 8 - Q :- H l-H S5 - <5«> *1 •-S-5 S.S •si •2 v •So Q to w B i-. a c c75 127 u BS o 2 o Z o as o en w I* p C be c75 0! < O 128 ADVANCE. Form J. BANK OF X, LIMITED. LIVERPOOL,.. .19. To M / now beg to put in writing the conditions on which this Rank has advanced or agreed to advance to you the sum of £ repayable by you on or before next, on the security of the undermentioned Property, which you pledged to this Hank, and for which this Bank now holds Warehouse Receipts or Warrants. This Rank is to have immediate and absolute power of sale, and, under that power, I authorize you to sell the said property on behalf of this Bank in the customary course of business, and if at any time, or from time to time, you shall be entrusted by this Bank with any delivery order or other document entitling you to the possession or control of the said property, or any part thereof, you are to hold such delivery order or other document and the property represented thereby in trust for this Bank and, when any sale of the said property has been effected by you, I direct you to pay the net proceeds thereof specifically and directly to this Bank, immediately on receipt, to the credit of your account. You are at any time, at the request of this Bank, to give to this Bank particulars of any sales of the said properly made by you, and to give to this Bank full authority to receive all sums due, or to become due, from any person or persons in respect of any such sales. Until the ivhole of the said advance shall have been repaid, the said property , or such part thereof as shall remain in the possession or under the control of this Bank, shall at all times represent a market value equal to at least 10 per cent, over and above the amount due for the time being to this Bank in respect of the said advance, and if at any time, or from time to time, such property shall represent less than the value aforesaid you are, immediately upon demand by this Bank, to pay or transfer to this Bank cash or property sufficient to make up such value. You are to keep the said property fully covered by insurance from Fire, in trust for this Bank, and, in the event of loss, to recover and receive the insurance money and to pay the same specifically and directly to this Bank, immediately on receipt, in like manner as proceeds of sales. You are also at any time, and from time to time, whilst any such delivery order or other document as aforesaid, or any property represented thereby, shall remain in your possession or under your control, immediately upon request by this Bank, to return to this Bank such delivery order or other document, or deliver to this Bank or its nominee such property. The above conditions and directions are also to apply to any Property which, with the consent of this Bank, may, from time to time, be substituted as security to this Bank for all or any of the under-mentioned Property, and to any delivery order or other document relating thereto and to all insurance money payable in respect thereof. For the Bank of X, Limited, Manager. PARTICULARS OF PROPERTY. Marks. Property. Weight. Price. Net Value Ship. Warehouse. 129 PARTICULARS OF PROPERTY. Marks. Property. Weight. Price. Net Value. Ship. i Warehouse. 130 (copy.) ADVANCE. BANK OF X, LIMITED, LIVERPOOL,.. .19... / now beg lo put in wilting the conditions on which this Bank has advanced or agreed to advance to von the sum of £ repayable by you on or before next, on the security of the undermentioned Property, which you pledged to this Bank, and for which this Bank now holds Warehouse Receipts or Warrants. This Bank is to have immediate and absolute power of sale, and, under that power, I authorise you to sell the said property on behalf of this Bank in the customary course of business, and if at any time, or from time to time, you shall be entrusted by this Bank with any delivery order or other document entitling you to the possession or control of the said property, or any part thereof, you are to hold such delivery order or other document and the property represented thereby in trust for this Bank and, when any sale of the said property has been effected by you, I direct you to pay the net proceeds thereof specifically and directly to this Bank, immediately on receipt, to the credit of your account. You are at any lime, at the request of this Bank, to give to this Bank particulars of any sales of the said property made by you, and to give to this Bank full authority to receive all sums due, or lo become due, from any person or persons in respect of any such sales. Until the whole of the said advance shall have been repaid, the said property, or such part thereof as shall remain in the possession or under the control of this Bank, shall at all times represent a market value equal to at least 10 per cent, over and above the amount due for the time being to this Bank in respect of the said advance, and if at any time, or from time to time, such property shall represent less than the value aforesaid you are, immediately upon demand by this Bank, to pay or transfer to this Bank cash or property sufficient to make up such value. You are to keep the said property fully covered by insurance from Fire, in trust for this Bank, and, in the event of loss, to recover and receive the insurance money and to pay the same specifically and directly to this Bank, immediately on receipt, in like manner as proceeds of sales. You are also at any time, and from time to time, whilst any such delivery order or other document as aforesaid, or any property represented thereby, shall remain in your possession or under your control, immediately upon request by this Bank, to return to this Bank such delivery order or other document, or deliver to this Bank or its nominee such property. The above conditions and directions are also lo apply to any Property which, with the consent of this Bank, may, from time to time, be substituted as security to this Bank for all or any of the under-mentioned Property, and to any delivery order or other document relating thereto and to all insurance money payable in respect thereof. For the Bank of X, Limited, (Signed) Manager. PARTICULARS OF PROPERTY. Marks. Property. Weight. Price. Net Value. Ship. Warehouse. i | Liverpool, 19.... To the Bank of X, Limited, I \we have received your letter of which the above is a copy. It correctly details the conditions on which you made the advance referred to, and I/we hereby undertake to carry out your directions. The Property therein specified is insured on your behalf against all Fire risks in the and the Policy held by me jus in terms of your said letter. Ijwe estimate that, after deduction of all charges, the value of the above property at to-day's prices is £ Yours faithfully, Sixpenny Stamp. 131 PARTICULARS OF PROPERTY. Marks. I'roperty. Weight. Price. Net Value. Ship. Warehouse. 132 B/L — W'housekeeper. Form K. Bank of X, Limited. .19. Messrs. Liver po •/. Dear Sirs, Please take delivery of the Merchandise described in the enclosed Bill oj Lading, as per particulars below, warehouse it in the Bank's name, and forward your usual receipt to us in due course. All charges to be claimed from Messrs.... Yours faithfully, Manager. Marks and Particulars. Property. Ship or Line. Arrived per 133 B/L — Whousekeeper. (Copy.) Bank of X, Limited. .19.. Messrs. Liverpool. Dear Sirs, Please take delivery of the Merchandise described i>i the enclosed Bill of Lading, as per particulars below, warehouse it in the Bank's name, and forward your usual receipt to us in due course. All charges to be claimed from Messrs.... Yours faithfully, Manager. Marks and Particulars. Property. Ship or Line. Arrived per Liverpool, 19.... To BANK OF X, LIMITED, LIVERPOOL. We acknowledge receipt oj Bill of Lading accompanying your letter, of which the foregoing is a copy, and we undertake to act in conformity with the directions which that letter contains. 134 *D/0 and Insce. Form L. Bank of X, Limited. Liverpool, 19.... To M. Liverpool. I enclose Delivery Order for Until further instructions from this Bank you are requested to hold the property represented by the said Delivery Order as Trustee for this Bank, and to realize the same for account of this Bank and pay the net proceeds, immediately on receipt thereof, specifically and directly to this Bank to the credit of account, accompanying each of such payments by a credit note in the enclosed form. You are further requested to keep the property fully covered by Insurance from fire in trust for this Bank and, in the event of Loss, to recover, receive and apply the Insurance money in like manner as proceeds of sales. Your confirmation on the annexed form will oblige, For the Bank of X, Limited, .Manager. For form of credit note see back hereof. 135 (5 ^ Si o o u < a w >< • v< z o " '-ti <-+? C/3 m ►J o o p< 00 Q o ■< * OS W •■* (/) H < > J > H W P Ol f> >— . b < «< c 1 1 ) o en w W H O 2 ILLS, and Ch Other Plac Liverpool. < : 2 : o (X w > o w << o o PC l o cfl (J hJ pq ■8 136 (Copy.) Bank of X, Limited. Liverpool, 19... To M Liverpool. I enclose Delivery Order for Until farther instructions from this Bank you are requested to hold the property represented by the said Delivery Order as Trustee for this Bank, and to realize the same for account of this Bank and pay the net proceeds, immediately on receipt thereof, specifically and directly to this Bank to the credit of account, accompanying each of such payments by a credit note in the enclosed form. You are further requested to keep the property fully covered by Insurance from fire in trust for this Bank and, in the event of Loss, to recover, receive and apply the Insurance money in like manner as proceeds of sales. Your confirmation on the annexed form will oblige. For the Bank of X, Limited, (Signed) Manager. For form of credit note see back hereof. Liverpool, 19.... To the Bank of X, Limited. I/we acknowledge the receipt of your letter to me/us, of which the foregoing is a copy, and also the delivery order therein mentioned and, in consideration of receiving the same, I/we undertake to carry out the terms of your said letter, and I/we expressly declare by this Instru- ment in writing that I/we will hold the said delivery order and the property represented thereby, and the net proceeds thereof respectively, and of all Insurances thereof, in trust for you, and that I /we will pay the said net proceeds specifically and directly to you immediately on receipt thereof by me/us. 10— (1819) 137 a> o a, CQ "3 s 5 fa o o < 1-4 Q W "* '2 OS CO Q w x u> H W D OK" m W w G3 ^ aCLJ Q^ H en 2 w 1 o 3 Pi O CJ 13S Substitution — Advance. Form M. Liverpool, 19 ••■• To THE BANK OF X, LIMITED. Referring to your letter of* relating to of £ made by you to me/us, I/we shall be obliged if in lieu of (particularized at foot hereof) being of the properly referred to in your said letter, you will allow me\us to substitute the * Please insert the date of the Bank's original letter of instruc- the advance No lions. 5 following property, viz.,. [also particularized at foot hereof) which is transferred to you as per warehouse receipts and/or warrants herewith. I/we hereby undertake to carry out in respect of the said substituted property the directions contained in your said letter, as if the said substituted property were therein specifically described. The said substituted property is fully insured on your behalf against all fire risks in the and the policy is held by me/us in terms of your said letter. I/we estimate that, after deduction of all charges, the value of the said substituted property at to-day's prices is £ Yours faithfully. Property Withdrawn. Property Substituted. Date. Marks. Property, i Ship. Marks. Property. Ship. Warehouse. 139 — O C Q W o .13 J3 S o On 13 • i-i w o Q H <^ o w" o ss o +j o ^£ s o o D ^3 a 6 ~* (3 rt PQ III 0) z . -a H •< 5S •ug S5 " ^ a k, ^ 2 141 c o aJ a> O O a, on © a — a o o hi O O ^•^" I u IS s 1^ .. 8 n d 9 1-4 > 1 9 a < 1— » u ai O.B 2 H-l t/; >< H as tu a. Pk Wl .3 H m s 2 8 § 8 ^| 3-t. a, t^ h^s g^ 55 § 143 Form P. LIVERPOOL, 19... To THE BANK OF X, LIMITED. Gentlemen, In consideration oj your granting to me/us such facilities in con- ducting my/our account with you whether in the Jorm of cash advances the discounting of Bills the accepting of Bills or the giving of guarantees by the Bank or in any other form as I/we may from time to time require and you may think fit to grant I/we hereby declare and agree that all property and securities which you now hold or which you shall or may from time to time receive from me/us or on my/our account whether in the form of Bills of Lading or other documents of title for cotton or other produce warehoused or stored in your name or on your account or stocks shares or securities or in any other form shall from lime to time be held by you as security for the payment to you on demand of the balance for the time being of my /our account with you and also for the due payment and discharge of all other obligations and liabilities to you matured and unmatured to which I/we shall for the time being be subject either alone or jointly with any other person or persons. You are at all times and from time to time to have full power of sale over all such property and securities as aforesaid and I/we hereby undertake and agree whenever so required by you at my four own cost at all times and from time to time to do all such acts and things as shall be necessary or as you shall deem expedient for the purpose of enabling you to effect and carry out any sale of such property and securities and receive the proceeds thereof. And I /we also undertake and agree from time to time whenever so required by you to supply additional margin either by payment of cash or the deposit or transfer of additional property or securities to such an amount or value as you shall require. And I /we further engage at all times and from time to time to keep fully covered by marine or fire insurance on your behalf all the property for the time being constituting this security and capable of being nsured and to hold the policies of insurance in trust for you and to recover and receive on your behalf and in trust for you the net proceeds of all such insurances and pay the same to you as and when received or if and whenever required by you so to do to deliver all such policies as aforesaid to you and do all such acts and things as you shall require for the purpose of enabling you to recover and receive the monies thereby assured. Yours faithfully, 145 e E K 55 o u >«' W H c/i W & <« 5 u H « W (J w H i— i CO o 9 O m T3 o ex ex H 4) 4> & +-> O T3 J3 o c rt C5 0) bO -t-> a B a a. e o O (A c o • rH o> H u o C i- O o bo X) h5 1=1 .1 o o bo C3 X> 5) «+J ,0 o In 13 -t-> o +■> X> a o a 3 n o 3 .a c 4-* S JB CO •*4 o J3 H 147 INDEX Advances : accommodation, arrangements for, 4 , amount of, 5 , period of, 89 , margin, 5, 89 against exported produce, 84 (cabled) against imported produce, 86 (not cabled) against im- ported produce, 87 -, repayment, 5 Affreightment, 47 Agents, how appointed, 21 who may be appointed, 21 Agency, revocation of, 22 Antecedent debt, 38 Articles of Association, 19 Bankruptcy Act, 1883, 30, 96 of customer, 96 Bill of Lading Act, 1855, 54, 58 Bills of Lading, 6, 7, 8, 12, 28, 31, 35, 36, 37, 39, 49, 59, 68, 69, 71, 76, 77, 83, 84, 85, 86, 88, 89, 90, 91, 96, 100 , consignees of, 61 , endorsement of, 58 , forged, 12 , hen for unsatisfied charges, 61 , irregularities in, 13 -, part delivery of goods, 61 , Railroad or Through, 51 -, received for shipment, -, specimen, 50 Bills of Sale Act, 1878, 28, 76 , 1882, 78 Borrower, 19 -, as a firm, death of partner, 95 -, death of, 95 -, insolvency of, 96 Bottomry. 48, 78 Charter Party, 47, 57 Companies (Consolidation) Act, 1908, 84, 85 Cotton, arrival of, 8 futures, 9 season, 5 Dead freight, 48 Delivery, constructive, 83 orders, 2, 8, 9, 14, 17, 37, 64, 66, 67, 71, 72, 74, 75, 76, 77, 88, 92, 93, 94, 97 Warrants Act, 1896 (of the Liverpool Warehousing Co., Ltd.), 69, 70 Demurrage, 48, 57 Despatch, 48 Deterioration of produce, 94 Dock warrants, 2, 31, 53, 62, 67, 68, 72, 77 Drafts, acceptance of shippers, 7 , American, tenor of, 6 , Egyptian, tenor of, 6 on Bank, acceptance of, 7, 141, 143 on importer, 7 , other countries, 6 Examiners' Certificate, 86 Factors, 23 Factors' Act, 1889, Chapter II Finance Act, 1905, 75 Freight, 46 Forms used : advance applica- tion, 88, 112 , application for Delivery Order, 92, 121 -, authority to accept, 143 -, Bill of Lading, property to be stored, 91, 113, 114, 115, 116 1 1 property sold ex quay, 91, 117, 118, 119, 120 149 150 INDEX Forms used : Bill of Lading, direct to warehousekeeper, 91, 133, 134 , conditions on which advance is made, 92, 129, 130 131, 132 -, Delivery or Transfer Order as security, 92, 135, 136, 137, 138 — , Delivery Orders, 92, 123, 125, 126 -, general lien letter, 90, 145 , letter to customer relative to draft left for acceptance, 141 — , substitution, 94, 139 -, Transfer Order, 92, 127, 128 , validation certifi- cate, 147 General average, 97, 98 Hat money, 47 Hypothecation, 78 Insurance certificates, 101 , fire, 8, 14, 88, 90, 97 — , bankers' clause, 15, 97 -, floating policies, 7, 98, 99, 100, 101 — , marine, 7, 13, 86, 87, 100 , valued policy, 101 — , unvalued policy, 102 Lien, 79 , possessory, 80 , equitable, 81 , maritime, SI Market, the, 17 Mates' receipt, 50, 59 Mercantile agent, 20 Merchant Shipping Act, 1862, 100 Mortgage, 82 Negotiable instruments, 53, 54 Part delivery, 61 Pledge, 29, 30, 31, 32, 33, 34, 38, 39, 42, 81-83 Primage, 46, 47 Proceeds of sales, 8, 9 Produce, various kinds, 1 1 Redemption, 83 Respondentia, 78 Sale of Goods Act, 1893, 2, 20, 24, 36, 37, 39, 54, 63, 6<-i, 76, 88 Set-off, 43, 44, 80 Shippers, 12 Special consideration affecting special commodities, 17 Spot cotton, 9 Stability of banks' customer, 11 Stamp Act, 1891, 62 Stoppage in transitu, 35, 37, 39, 40, 41, 42, 45, 54, 58, 72, 85 Storage, 8 Transfer Orders (see Delivery Orders) Trust letter, 5, 8, 9, 15, 16, 18, 19, 75. 76, 91, 92, 93, 94, 95, 96 forms (see appendix) Trustee in bankruptcy, 43, 67 Validation certificates, 12, 147 Warehousekeepers' warrants, 62, 67, 69, 77 receipts, 5, 8, 14, 28, 62, 63, 72, 76, 77, 83, 88, 90, 91, 92, 96, 97 Wharfingers' or warehousemen's certificates, 2, 67, 76 Warrants, power to issue, 14, 69, 70 Printed in Bath, England, by Sir Isaac Pitman d- Sun*, Ltd. x— (1819) PITMAN'S BUSINESS HANDBOOKS AN ABRIDGED LIST OF PRACTICAL GUIDES FOR :: BUSINESS MEN AND ADVANCED STUDENTS :: COMPLBTB LIST OP COMMERCIAL BOOKS POST PRBB ON APPLICATION BOOK-KEEPING AND ACCOUNTS ADVANCED ACCOUNTS. A Manual of Advanced Book-keeping and Accountancy for Accountants, Book-keepers, and Business Men. Edited by Roger N. Carter, M.Com., F.C.A., Lecturer on Accounting at the University of Manchester. In demy 8vo, cloth gilt, 988 pp. 7s.6d.net. AUDITING, ACCOUNTING, AND BANKING. By Frank Dowler, A.C.A. ; and E. Mardinor Harris, Associate of the Institute of Bankers. In demy 8vo, cloth gilt, 328 pp. 7s. 6d. net. THE PRINCIPLES OF AUDITING. A Practical Manual for Advanced Students and Practitioners. By F. R. M. de Paula (of the firm of De Paula, Turner, Lake